The Pakistan Credit Rating Agency Limited
Press Release


Andleeb Zahra

Applicable Criteria

Related Research

This press release is being transmitted for the sole purpose of dissemination through print/electronic media. The press release may be used in full or in part without changing the meaning or context thereof with due credit to PACRA

PACRA Upgrades Entity Ratings of Pakistan Refinery Limited.

Rating Type Entity
(07-Jun-24 )
(09-Jun-23 )
Action Upgrade Maintain
Long Term A A-
Short Term A1 A2
Outlook Stable Stable
Rating Watch - Yes

The Ratings of Pakistan Refinery Limited (the Company) draws comfort not only from its association with the state-owned petroleum corporation; Pakistan State Oil (PSO) but also from the fact that a considerable portion of country’s petroleum demand is met through the Company. The industry is in dire need of technological upgradation for the same reason, Pakistan Oil Refining Policy for Upgradation of Existing / Brownfield Refineries 2023 has been announced by the Government of Pakistan (GoP) in which incentives are offered for the existing refineries to upgrade and produce environmentally friendly EURO V compliant MS and HSD while cutting down Furnace Oil production. These incentives will be available once the Final Investment Decision (FID) is made. In line with the Country’s need the Company has announced the Refinery Expansion and Upgrade Project (REUP) which will double the refinery’s crude processing capacity from 50,000 barrels per day to 100,000 barrels per day. Work on Front-End Engineering Design (FEED) of REUP is progressing and is targeted to be completed by September 2024, this will follow by the finalization of the Engineering, Procurement and Construction (EPC) Contract and Financial Close. The Company is also in process of identifying potential investor for the project. The proposed incentives in the refinery policy plays a pivotal role in completion of the REUP. PRL's core business remains exposed to the vicissitudes in international crude oil and products prices, which in turn, steer the gross refining margins (GRMs) of the Company. Spreads between prices of petroleum products and crude oil remained favorable during the period resulting in better margins which was translated into improved performance. During 9MFY24 Gross Profit reported to be PKR 12,942mln (9MFY23: PKR 6,174mln). The profit after tax of the Company during 9MFY24 reported to PKR 5,269mln (9MFY23: PKR 2,531mln). The Company has undergone major turnaround spanning over 38 days in the 3QFY24, resultantly the Company suffered a loss of PKR (1.2bln) as compared to Profit of PKR 1.77bln in the comparative period. The Company reliance on short term financing during the period remains moderate to manage its working capital needs. Going forward leveraging indicators are expected to rise due to the project related loan that the Company will undertake for its upgradation project.
The ratings are reflective of the resilient business profile of Pakistan Refinery Limited (PRL) emanating from its sustainable operational history and its strategic importance in the domestic context. The Ratings are dependent upon PRL's ability to effectively shield its business profile from external vulnerabilities. Revived performance indicators and prudent financial matrix are imperative to uphold the ratings. Furthermore the ratings takes comfort form the refinery policy which will provide support to the REUP and contributes towards the sustainability of operations.

About the Entity
PRL is a public company incorporated in Pakistan in 1960. The refinery is situated at Korangi. PRL, having refinery capacity of 2.1mln tons per annum, came fully online in Oct’62. PRL, a hydro-skimming refinery, is designed to process various imported and local crude oil to meet the strategic and domestic fuel requirements of the country. The company has an eleven-member Board of Directors (including the CEO). Board comprises six non executive, four independent and one executive board member. Mr. Zahid Mir, the Managing Director and CEO of PRL, is a petroleum engineer by profession and also holds a Master’s degree in Business Administration. He is associated with PRL since 2019 and having a cumulative experience of over three decades. His strategic guidance along with support of well experienced and qualified team, bodes well with PRL's growth.

The primary function of PACRA is to evaluate the capacity and willingness of an entity to honor its obligations. Our ratings reflect an independent, professional and impartial assessment of the risks associated with a particular instrument or an entity. PACRA's comprehensive offerings include instrument and entity credit ratings, insurer financial strength ratings, fund ratings, asset manager ratings and real estate gradings. PACRA opinion is not a recommendation to purchase, sell or hold a security, in as much as it does not comment on the security's market price or suitability for a particular investor.